2017’s Best Coffee Cities in America

Sep 26, 2017 | Richie Bernardo, Senior Writer

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Ever since Starbucks democratized caffeine in 1971, a strong coffee culture has been brewing in America — and around the world, for that matter. According to a Gallup poll, nearly two-thirds of U.S. adults today drink coffee, and each averages 2.7 cups of joe per day. Some estimates even place Americans in the lead of global coffee consumption, at 146 billions cups per year, earning us the status as the most caffeinated humans on the planet.

What gave way to java culture? Science, for one, has convinced us that caffeine possesses multiple health benefits besides mental stimulation. At the right dosages, caffeine contributes to longevity, transforming our carafes and brewing systems into modern-day fountains of youth. Perhaps just as important, though, is coffee’s social purpose. We no longer enjoy it alone or only at home. Today, coffee stations are a staple of the workplace, and tens of thousands of shops serve as hubs for the mutual enjoyment of hot caffeinated beverages. The creation of these drinks has grown increasingly professional, too. Because of the skill required to make ever fancier coffee, being a barista has become less a part-time job than a career field. Latte art has even inspired a national competition among the most talented baristas.

But some local coffee scenes are stronger than others. To determine the best among them, WalletHub’s data crunchers compared the 100 largest cities across 14 key indicators of coffee lover-friendliness. Our data set ranges from coffee shops, coffee houses and cafés per capita to average price per pack of coffee. In addition, we compiled a list of top coffee retailers extending special savings in honor of National Coffee Day on Sept. 29. Read on for the winners, coffee-lover insight and a full description of our methodology.

Ask the Experts

The Specialty Coffee Association of America values the U.S. coffee market at $48 billion. Not only does that indicate how much Americans are willing to spend on the beverage, but it also signals business potential to aspiring entrepreneurs. For more insight on the coffee industry and consumption, we asked a panel of experts to share their thoughts on the following key questions:

What tips do you have for a person that wishes to enjoy his/hers daily java cup while on a budget?

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

In the current economic environment, is opening a coffee shop as a first business for young entrepreneurs still a good idea, or are most markets already oversaturated?

Spencer M. Ross

Assistant Professor of Marketing and Co-Director of the Manning Behavioral Lab at the University of Massachusetts Lowell Manning School of Business

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

A skilled barista at a coffee shop can pull and serve a quality shot of espresso on a multi-thousand dollar machine that the average coffee drinker wouldn't buy for their house; espresso is a finicky drink that takes training, practice, and skill to get tasting right. However, the average coffee drinker can easily brew a regular cup of coffee at home using the same methods as in a high-end coffee shop. For obvious reasons, “do it yourself” is always more affordable than buying from a coffee shop (after all, convenience is part of the price premium).

Cheap automatic electric brewers such as Hamilton Beach, Black & Decker, or Cuisinart can cost $30 for the average consumer, while prosumer brands such as Bonavita, Breville, or Oxo have offerings for the more interested hobbyist, and generally only cost between $100-200. This process takes between 5-10 minutes, but can brew an entire pot of coffee. Meanwhile, manual drip methods such as Chemex, Kalita Wave, or V60 cost between $20-40 (plus gooseneck kettle), and allow the consumer to be in control over the whole brew process -- which can be a very relaxing process in and of itself -- and help spark interest in learning the nuances of making a finished brew. Excluding boiling water, this process takes about 5 minutes, but generally brews a single cup.

One misconception is that pods are a "cheaper" way to save money on coffee, compared with buying coffee at a coffee shop. The perception that pods are cheap is because the packaging makes it easier to compare to brewed coffee shop coffee on a per-cup basis. However, when compared on a per-pound basis, the pods are more expensive, as they contain small amounts of coffee. If consumers still want to use a pod system, they can save money by buying a reusable pod and filling it using their own coffee. Aside from both the inferior brew process and the negative environmental impact of most disposable pods, a 40-count bulk box of pods costs slightly more than a pound of specialty coffee. For smaller quantities, it's nearly two-to-three times the average cost of a pound of specialty coffee.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Most commodities (e.g., corn, rice, sugar) are not thoroughly commercialized upon scaled growth. Sure, there are brands such as Domino Sugar or Minute Rice, however the underlying commodities rarely differ across brands. However, the coffee industry is unique because it is a commodity product that's been not only been commercialized in the U.S. since World War II, but has also suffered in modern times from many antiquated perceptions of the product.

During WWII, the military developed freeze-dried instant coffee that would be shelf-stable for soldiers on the front lines, and ultimately led to companies like Sanka, Folgers, Maxwell House, and Chock Full o'Nuts. But in order to scale commercial distribution of the coffee to a mass market product, these brands made coffee that was generally darkly roasted to mask tasting defects, with the outcome of tasting bitter (to make it palatable, many people ended up putting cream and sugar in their coffee). Perceptions that coffee should be dark roasted and that a dark roast will taste bitter come from this early area of coffee commercialization and have pervaded public conceptions of how coffee "should be." To this end, most coffee drinkers have the long-standing association of dark roast coffee with the type of coffee that "wakes them up."

The fictional Juan Valdez helped to greatly increase American coffee consumption from the late 1950s through the 1980s, but did nothing to re-mold consumer perceptions of what quality coffee was and why it would be worth spending more. During the 1970s through the 1990s, companies like Peet's, The Coffee Connection, and early incarnations of Starbucks had a significantly large impact on creating the specialty coffee market, however that part of the market at that time was a very small segment of the overall coffee market. Starbucks helped kickstart the industry again in the mid-to-late 1990s -- particularly through the retail aesthetic of coffee shops as "third place" and attempted to make Americans more conscious of where their coffee was coming from and who was making it. As a result, consumers were willing to pay a small premium over comparable coffee. But again, as the scale of Starbucks reached more than 14,000 stores globally, the quality of the commodity seemed to suffer from scalability issues and the "signature roast" of Starbucks would became a turnoff to many coffee drinkers.

In the late 2000s, coffee growers started turning inward toward improving the quality of the coffee and roasters started showcasing lighter roasts that highlighted the flavor profiles, origin, and terroir of the beans. At the same time, customers who became turned off by mass market coffee and darker roasts started turning on to these roasters, who often sell at a premium over comparable coffee shops. Consumers who are into specialty coffee appreciate that the premium they pay for their coffee is a function of several factors: first, they understand that paying for quality throughout the coffee value chain (from farmer to roaster, and even barista) is a premium, where value is added in each step from seed-to-cup. In particular, direct trade (or relationship coffee) models encourage domestic roasters to have genuine, direct relationships with the farms they source from, meaning that the farmer gets feedback from the end users and is able to use that feedback to improve the crop the following year. This even contrasts with fair trade models, where a fixed, per pound premium is paid in addition to the arm's length commodity auction cost.

Second, specialty coffee consumers understand that, as a commodity, coffee suffers from the vagaries of basic supply and demand in conjunction with growing conditions. This means there may be additional value in a coffee from a farm that only has the ability to grow a lot that yields 700 pounds of quality product, while a coffee that grows in substantial scale (most of the coffee market does) can be sold for low costs at commodity auctions. Hacienda La Esmeralda, a Panamanian Geisha varietal is considered one of the world's best coffees, is sold for $601 per pound, for a 100-pound lot. The lot that was auctioned to importers/roasters at $601 per pound in 2017, was a record auction price. Its price was a function of known quality of the lot, crop yield of the lot, and importer/roaster demand for the lot.

Furthermore, if these high-quality areas are hit by environmental damage (such as coffee rust, which is a fungus that destroys coffee trees that many Central American farms now are seeing more of as global temps increase), the amount of saleable coffee farmers produce becomes even scarcer, driving up costs. It is then not surprising to a specialty coffee consumer when a cup of La Esmeralda costs $15 at a cafe and is not much different than when an oenophile spends hundreds of dollars on a wine of good vintage.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

This depends what kind of coffee shop is being opened. According to the Specialty Coffee Association, growth in the specialty coffee industry has generally been positive, with nearly 50% growth in store openings over the past decade. Meanwhile, consumption of daily specialty coffee has gone from nearly 15% to nearly 35% in the past decade. Consumers are becoming more interested in what specialty coffee is, both in terms of product, process, and value chain. In that light, there are a lot of specialty coffee shops opening in both smaller cities, larger cities, and suburbs alike -- and some of the finest roasters in the country are located in places like Nelsonville, Wisconsin; Fayetteville, Arkansas; Canton, Connecticut; Sacramento, California; Amarillo, Texas; Acton, Massachusetts and so on.

Although coffee is a commodity product, the product for the end user is perishable (with a noted exception that several major brands have increased their refrigerated, ready-to-drink options), as hot coffee becomes unpleasant after a couple of hours. Therefore, depending on the local population density and existing saturation of the market, a specialty coffee shop can become an exciting business proposition, a way to bring to quality coffee into the community, and to bring the community into coffee. Furthermore, since value is added during the roasting process -- and since a roaster is an expensive piece of equipment -- different roasters have different "philosophies" and approaches to how they roast the beans they've purchased, meaning even within a local market, there is a lot of knowledge sharing between and among industry insiders (the best place to see this is at a Thursday Night Throwdown, where local baristas come together at a different shop each time in an informal competition for prizes and bragging rights).

Terri Lonier

Dean of Career and Professional Experience at the School of the Art Institute of Chicago

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Consider turning your home brewing into an "experience" -- the Aeropress makes a fine cup of coffee. Alternatively, order straight-up coffee and avoid, or limit, the fancy drinks. Don't think of it as a deprivation, as much as a choice to use your money in another way.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Folks are willing to spend more for a comparable cup of coffee because they are paying for much more than the coffee -- they're paying for the full experience of the brand. When he launched Starbucks, founder and CEO Howard Schultz intuitively understood the appeal of a "third place" -- one that wasn't home or work. People are willing to pay for everything a brand has to offer -- from the environment, the friendliness of the baristas, the ability to see their drink being made, the comfort that comes from knowing your experience is going to be similar in any store. There's also the community feel of having others recognize you and say hi to you each morning as you start your day. This brand alignment can run deep -- some people are avid Starbucks fans, others swear by Dunkin', while others support the local coffee house around the corner.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Starting a business is never easy, and a lot depends on local market conditions. Entrepreneurs would need to determine if they could create a distinct alternative to other shops in the area. What can set this new place apart from the competition? Fixed and variable expenses will also impact the venture's viability. Is rent relatively cheap, or expensive? What sources do they have for materials, and labor? Most of all, does the budding entrepreneur have experience working in a coffee shop, and do they understand the daily demands and operations? Smaller startup coffee shops can survive -- and thrive -- amid much larger competitors, but they must have these elements in place and be able to attract a loyal customer following.

Nwamaka (Amaka) Anaza

Assistant Professor of Marketing at Southern Illinois University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

With limited financial resources, consumers can get good quality java from their local grocery stores. Store-bought coffee is not as bad as most people think. They are well-made, high-quality, and good flavor at a reasonable cost. So why not indulge?

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

There are several reasons. Some people are loyal to certain brands that are more expensive. Others prefer the taste or convenience they get from buying a cup of coffee at Starbucks or Dunkin’ Donuts. It could also be perception-driven. Some people perceive more expensive coffee to be of better quality, which may not necessarily be true, but again, it is all about how the product is positioned in the consumer’s mind. It could also be location-driven. For example, if I drive past an expensive coffee house every morning on my way to work, I would be more inclined to grab a cup despite the cost.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

This depends on location, existing market opportunities, consumer demands, market size and demographics (particularly disposable income), entrepreneurship savviness, competitive advantage, competition, sourcing of coffee beans, investment potential, etc. For example, a local coffee shop in the heart of Minneapolis may not be the best idea with giants like Caribou Coffee, McDonald’s, Starbucks, Dunkin’ Donuts, and well-known local stores like Spyhouse Coffee and Vicinity Coffee. However, in Murphysboro, Illinois, a coffee shop may just help revitalize the downtown area and satisfy local residents’ growing demand for coffee.

Michael H. Morris

George and Lisa Etheridge Professor of Entrepreneurship in the Warrington College of Business at the University of Florida

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

There are a host of reasons, but the key one is that they are buying more than the coffee. The easy explanation is that they are buying an “experience” in terms of the look, feel, ambience, related products sold, kind of staff, quality Wi-Fi, music and so forth in the coffee shop (which proprietors would probably try to call something other than a coffee shop). But beyond this, drinking coffee itself has become a personal experience (of relaxing, reflecting, re-energizing), but also a part of people’s identity or personal brand.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

It is a saturated market and not something I would recommend. However, the key would be to find a niche and specialize. Examples would be extremely high-end, or the most exotic coffee-related products, or a coffee shop for professional women over 45, or for people who love pets, etc. But one would need to be more creative and insightful than these examples.

Michael Goldberg

Assistant Professor of Design & Innovation in the Weatherhead School of Management at Case Western Reserve University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

We are coffee addicts in my house, and care deeply about a good cup of coffee. My wife found an excellent coffee at Whole Foods -- the Pleasant Morning Buzz Vienna Roast, Whole Food's brand (365 Everyday Value). You can buy 2 pounds of terrific coffee for about $13. That's much cheaper per cup than going out to a coffee shop.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Sometimes you pay for an expensive cup of coffee for the experience, to meet a friend out at a nice place to talk or have a meeting. There is also that small segment of consumers that is willing to pay for the intricate designs on the top of the foam that creative baristas come up with.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

You have to analyze a particular market to answer that question. Surely, there are places left in the world that need a good coffee shop. Rising Star is a local coffee shop that opened not long ago in Little Italy in Cleveland, it's not far from a Starbucks, and it's thriving.

Kerry Plemmons

Professor of Practice in the Daniels College of Business at the University of Denver

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

There are some truly great coffee making machines on the market that combined with quality coffee make excellent at-home or at-office coffee. Howard Schultz, CEO of Starbucks, used to always grind a bit of fresh coffee and make a cup from a French press at his home prior to heading to his Starbucks. There are also excellent and reasonably priced espresso machines that just require a bit of training.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

I would change the wording to special cup of coffee. There is great research in behavioral economics that suggests we expect special service or special quality if we pay the extra. The human mind wants to believe their cup of coffee is worth the price and great baristas ensure that value. Starbucks and great local shops must create a holistic value delivery system with every cup.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

The simple answer is yes -- when extraordinary value is created in a location that feels good to the segment in need. Most coffee shops just try to copy Starbucks and they will always fail. Check out a coffee shop called Steam on Pearl Street in Denver and you will find two Lebanese brothers who worked for Starbucks, and then built a neighborhood shop that people line up to get into every day.

Jorge Villegas

Associate Professor and Chair of the Business Administration, BUS and MBA Programs in the College of Business and Management at the University of Illinois at Springfield

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Brew your coffee at home or at the office. Invest in a good grinder for home and a simple coffee maker (or two, if you need to have one at the office). More buttons/options/features add cost and higher chance of failure for a minimal benefit. At my home, we have a very small, simple coffee maker (4 cups) because my wife and I realized that we wasted a lot of coffee during the day (we’d make a big pot and then we’d be unable to drink it).

Buy whole coffee beans when they are on sale at a local roaster. I have been unable to find good, cheap options online, but maybe there are some out there.

Invest in a nice travelling mug. Saves on disposable cups (and it’s better for the environment).

Buy filters, etc. at Walmart. You don’t need to get fancy filters.

Don’t use bottled water to make your coffee (consider the cost and the environment). Use a filter, like Brita.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

As a marketer, I understand why people pay $20 for a half-pound bag of coffee. In some ways, we drink what we pay. Research has shown that consumers who pay more for food or drink items tend to experience higher positive emotions. If you love Starbucks, the company’s values match yours, and/or you like their retail environment, more power to you. We buy experiences, images, and a guarantee that what we are drinking is a good product. Also, there is a lot of cheap coffee that upsets people’s stomachs.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

I don’t think restaurants, coffee shops, and similar businesses are a good idea for a first business. The costs and risks of opening a coffee shop are considerable. Also, just because someone likes coffee (or food), he or she is not an expert on the logistical, HR, etc. issues related to owning a restaurant or similar. There are a lot of failed business. Here in Springfield, Illinois, we have three-four Starbucks, one Dunkin Donuts, one Krispy Kreme, and maybe ten or more locally-owned coffee shops. I don’t think there is capacity for more in this market. I might be wrong -- it seems that the local coffee shops are relatively stable (I have not seen many leaving the market). It seems that all of them depended heavily on their loyal customers and having a great location.

Jonathan P. Allen

Professor and Founding Chair of the Technology, Innovation, and Entrepreneurship Department at the University of San Francisco

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

I asked the founder of mycaffea.com and local coffee entrepreneur Cody Fergusson. He said, "don't go out." Order great beans, and learn how to make a consistent cup at home.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Convenience, habit, perception of higher quality, and for a few, a search for new tastes and preparations.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Really depends on the location. San Francisco has almost 1 coffee shop per 1,000 residents, that's pretty insane saturation. Seattle is not far behind. Yet other major metros are much less covered. Entrepreneurs should be aware of consolidation trends in the industry, as seen in the $500 million majority stake Nestlé recently purchased in local favorite Blue Bottle Coffee.

Still, demographic trends like Millennial growth and small household size are favorable, and expansions into in-home coffee preparations that are convenient but also green (not the plastic K-Cups) are still ripe for innovation. Addictive, yet healthy products with high margins are always worth considering by entrepreneurs.

Jennifer B. Barhorst

Assistant Professor of Marketing at Lander University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

I would suggest a strategy of “savoring a moment.” Plan one or two trips per week to the most luxurious place to have coffee locally. That way, you have something to look forward to.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Perception is everything. The strongest brands capture and develop what I call a ‘share of mind’ that continually results in a ‘share of wallet’. When we think of them, we associate various aspects of their brand with increased quality, service and experience. When a brand has managed to do that, they can sell at a price premium.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Opening a coffee shop in the current economic environment could be a viable option for young entrepreneurs. Due to advances in digital technologies, we have an unprecedented level of information at our fingertips about consumers. Using technology to mine the information flow could help would-be startups to capture information about wants and needs that aren’t currently being addressed in the local market. In turn, they could use a promotion and brand building strategy that caters to today’s mobile-empowered consumer, and their unmet wants and needs.

Frank Tian Xie

John M. Olin Palmetto Chair Professor in Business and Associate Professor of Marketing in the School of Business Administration at the University of South Carolina Aiken

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

For a budget-conscious, "smart" consumer today, who happens to love gourmet coffee or other nice things in life, one way to find things that are nice yet not that expensive is to go abroad and/or online. When you travel to places such as Japan, Switzerland, or Taiwan, mingle with and talk to locals, and they are likely to offer you some very good tips on where to get them. When you make your purchase, buy by bulk. Then you will have a constant supply of things you like. After you developed your love for a certain brand that you really enjoy, search online to find it, or buy directly from the source -- that's another way to get great things in a bargain.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

People pay two or three or five times more for a comparable cup of coffee for the exact same reason people pay five or ten times as much for a car that takes you from point A to
point B the same way a Toyota Corolla does. We prefer great flavor, nice texture, enduring after taste, comfort, luxury, prestige, status symbol, and admiration and confirmation from our peers. In addition, a cup of gourmet coffee is an easier, cheaper way to indulge yourself and impress others without spending a fortune. So, in addition to a little advantage in taste, and if image or impressions (first, second, and subsequent) are important to you, you will buy that cup of coffee with a reputable brand logo on it.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Even in a bad economic environment, opening a coffee shop or other traditional retail establishment is a good idea for young entrepreneurs, provided you really put great effort, superb marketing research, and dedication to quality and service to the operation. If you can get a niche that others can't simply copy, you will make money regardless of the economic climate, as people always have the needs and wants to a certain extent. Given the current economic environment and Trump's America First policy, a lot more opportunities should emerge.

Dinakar Jayarajan

Assistant Professor of Marketing in the Stuart School of Business at Illinois Institute of Technology

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Make your own coffee.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

That's the success of Starbucks marketing.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Yes, the markets are oversaturated -- however, consumers want variety and uniqueness. So, if someone is able to come up with an idea that is really unique and strongly differentiated from the chains, it should work.

Deirdre Malacrea

Professor of Practice in Marketing in the College of Business and Economics at Lehigh University

Why are some folks willing to spend two or three times more for a comparable cup of coffee? And In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Objectively, certain coffees may truly be better by virtue of the quality of the beans used, or the care used in the preparation. The convenience of a ready-made beverage on the go may outweigh the time and effort of making and transporting coffee from home. However, consumers can have a variety of less tangible reasons to explain their willingness to pay a premium price for a coffee. That’s where the role of brands come in. Consumers can be motivated to pay extra to avoid risk in a purchase situation.

To lessen the chance of getting a bad cup of coffee, brands can provide a perceived assurance of quality and consistency that that a “no-name” experience may not provide. Additionally, brands can telegraph to others in your reference group of friends and acquaintances that you are a person of discernment and good taste. Local coffee shops can mitigate these advantages of the well-known brands by building up their own value proposition, whether through novel, signature drinks and snacks, catering to customers with personalized, caring service, or hosting themed events and experiences.

David E. Desplaces

Assistant Professor of Global Commerce at the College of Charleston

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Java has become the necessary fuel to think and engage at school and the workplace. The issue of caffeine or other stimulants necessary for many to perform has in fact become a recent issue raised by the leadership of the United States Department of Defense, with reported addictions among all ranks, and the need to limit or counsel against excess to avoid issues on the battlefield. Caffeine is not just in your java, but in so many other items we know. For the budget seekers, you can easily bring coffee to your workplace, home, or even boat. Portable units or even “cold brews” have made the average cup of coffee less than $1 each, while still allowing you to make that unique, special cup of coffee. National brands are actually the more affordable for a basic cup of java (statistically).

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

The outlet you selected to make that cup of coffee understood that there is a great social dimension to that cup of coffee. Folks are seeking the experience of being acknowledged by name, recognized as a regular, and having that special drink made just for them. The complexity and variation of coffee offerings give the customer the perception of value in a specialty drink. Furthermore, the types of employees (eclectic/fun/artistic) create a major draw across economic and social classes. Lastly, some of the outlets have become major “see and be seen,” with many single folks hanging out and checking people out.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

A coffee shop is a great concept, but you have to be ready to roll up your sleeves, as well as find either good partners, or abundant access to motivated employees to keep the hours (many places choose their location to close at night and/or on weekends). The market is not saturated yet, but the successful operation is the differentiating factor in keeping the doors open. You have to think about mastering the business element (marketing and operations), acquiring the knowledge of coffee (master in sourcing and making the great cup of coffee -- technical mastery), and the energy (such a business hinges on making the experience consistently pleasant for each and all of the surrounding customers). You have to master the art and science of running a coffee shop -- but all of these do not matter if you do not have the location. Location, location, location -- key reason why such businesses might fail.

Cara Lee Okleshen Peters

Associate Dean and Professor in the Management & Marketing Department at Winthrop University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

There are lots of promotions out there for the regular coffee drinkers. For example, some small/niche coffee shops have punch cards where you get a freebie after the twelfth purchase. In addition, Starbucks has prepaid debit cards on which you can earn points for purchases. If you are a Bank of America customer, you can even preload these Starbucks cards using your bank credit card, and get cash back in your checking account. All ways to save on your java.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

Going to purchase that premium cup of coffee is prestigious and a social event. People who carry around their Starbucks coffee cups look and feel cool. In addition, these same people like the environment of hanging out in the coffee shop, being seen, and socially interacting with others. It's all about the experience and the social environment in a coffee shop.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

I don't think the young entrepreneur can take on the large coffee companies, like Starbucks. Starbucks is a well-established brand with a loyal following. However, if someone were going into the coffee shop business, I think he/she would need to establish a unique niche. A funky shop, located in an artsy/trendy part of town, with local art on the walls and serving homemade cake and other desserts (along with the coffee) can be quite successful. So, that would be the way to enter the market for that first-time entrepreneur.

Brooke Reavey

Assistant Professor of Marketing in the Brennan School of Business at Dominican University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Go for it -- treat yourself. Consumer research shows that we often have a very hard time keeping and maintaining a budget. There’s a good reason for this -- there are temptations all over. However, if buying coffee every day is something you enjoy and can afford, it’s helpful to spend the money and think of it as a daily treat. It’s best to earmark some money each week for your coffee expenses and spend in cash, so that you can see how much you have left to spend for the remainder of the week. Using cash will help you from spending more on impulse items at the store counter.

Additionally, most coffee houses have loyalty programs (i.e., buy 10, get 1 for free), or discounts if you bring your own cup, so try to find a coffee house by you that will reward you for your caffeine addiction. And most importantly, as long as you can afford it, don’t feel guilty about buying coffee at a store. We know that for budgeting, as long as you think of your purchase as a treat (as opposed to something you have to buy -- like car insurance), you will get a boost of satisfaction from the purchase which will increase your mood. So, go ahead and treat yourself.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

There are numerous theories surrounding this phenomenon, but one prevailing theory suggests that consumers are willing to spend more for the branded logo so that they can send a signal to others that their personality aligns with the brand’s personality. I’m looking at you, Starbucks, and your $5 lattes in your branded cup. It’s similar to why some consumers prefer Carhartt and others prefer Dr. Martens. Both brands sell boots, but both brands have completely different personalities, and consumers will align themselves with the personality they believe is best for their image and how they like to present themselves to others.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Yes, I do not see coffee shops going away anytime soon. The key is to conduct market research on the competing coffee shops in the area. The new coffee shop will need a differentiator -- whether it’s ambiance, a special way of brewing or roasting the beans, a socially conscious spin, etc. While tempting, resist the urge to compete on price unless it’s absolutely necessary. Loyal consumers are not as likely to be swayed by a cup of coffee that costs $.25 less. You’ll have to understand who your ideal target market is (i.e., work-from-home crowd, hipsters, moms, etc.) and adjust your strategy from there.

Elisabeth Power

Assistant Professor of Business and Economics in the School of Business at Saint Martin’s University

What tips do you have for a person that wishes to enjoy his/hers daily “java” cup while on a budget?

Despite a recent decrease in the price of coffee beans, the cost for a cup of coffee has continued to increase. The national average for a medium-sized latte nears $4.00 -- customers on a budget may be wondering how to enjoy a daily coffee ritual. Coffee lovers can save money by downsizing. The first few sips of coffee taste the best, because the brain sends out pleasure signals right away. However, after the initial satisfaction, the pleasure signals are reduced. It may take time for a customer to adjust to a small cup, but the rewards pay benefits to the pocketbook, and the waistline.

Another tip benefits coffee-lovers who add milk. Many baristas will provide a larger cup for a smaller drink, especially if the customer explains the need to add milk. In this case, the customer can add milk without pouring out coffee to make room. The customer pays for a tall coffee, but the Grande-sized cup increases the value.

Why are some folks willing to spend two or three times more for a comparable cup of coffee?

People drink coffee for a variety of reasons; many like the ritual and relationships that develop at the coffee shop. Buying from the same location regularly allows for increased social interaction between customers, baristas, and fellow patrons. Another group of customers pay extra to buy coffee that yields an enhanced product, or benefits growers, as we find with beans grown through organic or fair trade practices. These coffee customers are willing to pay more for a product that aligns with their personal values. Another group pay extra for the consistency and value offered by national or regional coffee shops. A daily coffee ritual can be an affordable and practical luxury -- something to look forward to, for instance. Maybe I can’t afford everything I want, but I can still afford the coffee drink I love.

In the current economic environment is opening a coffee shop as a first business for young entrepreneurs still a good idea? Or are most markets already oversaturated?

Young entrepreneurs may see the specialty coffee shop market as an investment opportunity. According to Statista data, worldwide coffee demand continues to increase slightly each year. However, the number of coffee shops increased most significantly prior to 2008. The industry continues to grow slowly. For example, a little more than 1,700 coffee shops opened between 2008 and 2015. Between 2005 and 2008, more than 8,300 opened. This market has matured to the extent that new entrants into the market will have to overcome heavy competition.

Methodology

To determine the best cities for coffee lovers, WalletHub’s analysts compared the 100 most populated U.S. cities across 14 key metrics, which are listed below with their corresponding weights. Each metric also was graded on a 100-point scale.

We calculated each city’s weighted average across all metrics to calculate its total score, which we then used to rank-order the cities in our sample. A total score of 100 represents the most favorable conditions for coffee lovers.

In collecting our sample, please note that we considered only the “city proper” in each case and excluded the cities in the surrounding metro area. For metrics marked with an asterisk (*), we used the square root of the population to calculate the population size in order to avoid overcompensating for minor differences across cities.

Average Price per Pack of Coffee: Full Weight (~6.25 Points)

Average Price of a Cappuccino: Full Weight (~6.25 Points)

Average Spending on Coffee per Household: Full Weight (~6.25 Points)

Share of Adult Coffee Drinkers: Full Weight (~6.25 Points)Note: This metric measures the percentage of adults who reported drinking “ready-to-drink” coffee in the past six months. “Ready-to-drink” includes already prepared coffee found in the cold section of grocery stores.

Share of Households that Own Coffee Makers: Full Weight (~6.25 Points)Note: This metric includes households that own electric coffee grinders, coffee makers (single-cup/pod-brewing) and/or espresso/cappuccino makers.

Google Search Traffic for the Term “Coffee”: Full Weight (~6.25 Points)Note: Search traffic was measured as a share of the national average.

“Coffee Lovers” Meetups per Capita*: Full Weight (~6.25 Points)

Presence of Coffee-Centric Events: Full Weight (~6.25 Points)

Average Ranking of Coffee Shops on The Daily Meal’s ‘50 Best Coffee Shops’ List: Full Weight (~6.25 Points)Note: This metric is based on The Daily Meal’s ranking of “America’s 50 Best Coffee Shops,” which “measured the spots based on a wide range of criteria,” including: the quality of coffee beans used; the relationship of the shop with its roasters or whether the shop roasts its own beans; the culture of the shop; knowledge and training of the shop’s baristas; and the quality of snacks and pastries.

Sources: Data used to create this report were collected from the U.S. Census Bureau, Council for Community and Economic Research, Numbeo, Yelp, Esri's Updated Demographics (2017 estimates), OpenWiFiSpots, Meetup, Caffeine Crawl and Coffee Fest.

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